In the late 1980s, the health benefits of oat bran were widely advertised. If the price of oats increased 50%, causing the quantity of oats supplied to increase by 40%, then the price elasticity of supply was A) 1.25. B) -1.25. C) -0.80. D) 0.80. ANSWER D
Date: September 9th, 2020
The price elasticity of demand for gasoline is estimated to be -0.2. Two million gallons are sold daily at a price of $3. Use this information to calculate a demand curve for gasoline assuming it is linear. What will be an ideal response? ANSWER Elasticity = slope (p/Q), -0.2 = slope (3/2). The slope […]
Date: September 9th, 2020
An agricultural corn market faces a positive supply shock due to a beneficial rainy season and the use of new genetically modified seeds. As a result, farmers face the largest crop harvest in decades. Which answer below explains how a farm could actually go bankrupt under this scenario. A) The elasticity of supply for corn […]
Date: September 9th, 2020
The percentage change in the quantity supplied in response to a percentage change in the price is known as the A) slope of the supply curve. B) excess supply. C) price elasticity of supply. D) All of the above. ANSWER C
Date: September 9th, 2020
If a one percent increase in the population leads to a five percent increase in the quantity sold, an economist would claim A) the good is elastic with respect to population. B) the good is inelastic with respect to population. C) the good is a fad. D) consumers are misinformed about the quality of the […]
Date: September 9th, 2020
If a good has an income elasticity of demand greater than 1, one might classify that good as A) a necessity. B) a luxury. C) unusual. D) inelastic. ANSWER B
Date: September 9th, 2020
The cross price elasticity of demand for a good x is the percentage change in the quantity demanded of good x in response to a given percentage change in A) income. B) the price of good x. C) the price of good y. D) the quantity demanded of good y. ANSWER C
Date: September 9th, 2020
If the cross price elasticity of two goods is -3.5, then A) these two products are relatively elastic substitutes. B) these two products are relatively inelastic substitutes. C) these two products are relatively elastic complements. D) these two products are relatively inelastic complements. ANSWER C
Date: September 9th, 2020
The price elasticity of demand A) depends on the units in which quantity is measured. B) depends on the units in which price is measured. C) depends on the units in which money is measured. D) is independent of the units in which quantity and price are measured. ANSWER D
Date: September 9th, 2020
If the price of orange juice rises 10%, and as a result the quantity demanded falls by 10%, then one can conclude that the demand for orange juice A) is perfectly elastic. B) is inelastic. C) has a unitary elasticity. D) has a constant elasticity. ANSWER C
Date: September 9th, 2020
